Turkey: A New Type Of Lawsuit For Group Companies - Controllıng Company And Its Board Of Dırectors' Lıabılıty For Compensatıon In Case Of Unlawful Abuse Of Control

Last Updated: 19 September 2013
Article by Serdar Paksoy and Gokhan Bozkurt


Group companies consist of a main "controlling company" exerting dominance over one or more "controlled companies", either by way of holding the controlled company's majority shares or concluding contracts or otherwise having de facto control over the controlled company. In order to ensure accountability and the balance of interests, the new Turkish Code of Commerce numbered 6102 ("TCC") has subjected the relationship between a controlling company and its controlled companies to certain rules. According to the TCC, all acts contrary to these rules will result in the controlling company and its directors' liability for compensation.

As a result of these rules regarding controlling companies and directors, numerous types of claims have been introduced. Among these claims, the liability lawsuit regarding "Unlawful Abuse of Control", set forth in Article 202 of the TCC, comes up as the most prominent one. There are two different forms of liability provided for by the Article: (1) the lawsuit for liability arising from the controlling company's intervention in the management of the controlled company (202/1) and (2) the lawsuit for liability of the controlling company for the controlled company's general assembly or some major decisions of the board of directors (202/2).

Protection of the Controlled Company from the Controlling Company

According to the rule set forth in the first paragraph of Article 202, a controlling company must take into account the interests of the controlled company when exercising its control and shall not cause any losses for the controlled company. Should any loss result for the controlled company, such loss shall be offset by the controlling company. Since the examples of loss cited in the Article result from actions within the authority of the board of directors of the controlling company, the Article mainly regulates the liability arising from interventions by the controlling company on the controlled company's board of directors. It is therefore intended to direct the liability upwards to the controlling company's board of directors'.

Article 202 provides examples of situations of loss, which can be defined as the diminishment of assets or the putting of assets under the risk of diminishment. In particular, it mentions the "inducement" by the controlling company of the controlled company: (1) to conclude legal transactions, such as the transferring of a business, assets, funds, personnel, credits and debts; (2) to reduce or transfer profits; (3) to limit its assets with rights in rem or in personam; (4) to restrict or cease its investments and (5) to undertake sureties, warranties and guarantees. Any material damages arising as a result of these abovementioned instances are not decisive. Rather, it is sufficient that a transaction was concluded in a manner that results in a "loss" of any type to the controlled company.

If the controlled company suffers any losses as a result of the intervention of the controlling company, then the controlling company will be under the duty to offset such loss suffered by the controlled company. According to this rule, the controlling company will either compensate the loss of the controlled company or undertake to compensate the loss of the controlled company, both to be within the relevant activity year.

Therefore, the provision both ensures the controlled company's recovery of its losses which may arise from the controlling company's interventions, and also leaves an open door to the exercise of the controlling company's policies over the controlled company by way of offsetting, which bars the controlled company from filing a lawsuit against the controlling company.

Compensation Lawsuit against the Controlling Company and the Members of Its Board of Directors

If, as a result of the inducement by the controlling company and a top-down order, an act or transaction is concluded that would breach the controlled company's board of directors' duty of care resulting in a loss by the controlled company, and no offset is made against this loss in that activity year, the controlled company's shareholders or creditors can file a compensation claim against the members of the board of directors of the controlling company, and claim for compensation for the controlled company's losses.

The controlling company and its board of directors' members may be relieved of liability only if they can prove that the transaction, which resulted in a loss by the controlled company, could have been concluded or avoided by members of an independent company's board of directors, who would observe the company's interests in good faith and act with a prudent director's care under the same or similar circumstances.

Coercion into Purchasing Shares by Court Decision

Besides the compensation lawsuit, the TCC entitles the shareholders of the controlled company to another alternative right. According to the relevant provision, the court can decide that the controlling company purchases the shares of the claimant shareholders of the controlled company instead of paying compensation, provided that such decision is equitable. Even if there is no request by shareholders to have their shares purchased, the court can deliver a coercion decision per se for the purchase of the shares by the controlling company.

This provision of the TCC would also apply if the controlled company had been suffering a loss as of the date of the TCC's entry into force. According to the rule, a controlled company's loss in existence at the time of the TCC's entry into force, which would cover losses before 01.07.2012, must be offset or undertaken to be offset by the controlling company within two years after the TCC enters into force. Otherwise, if a controlling company fails to rectify such loss within this time frame, the controlled company can file a claim against the controlling company at the end of the two year period, namely after 01.07.2014.

Right to File Cases against Foreign Shareholders of Foreign Capital Companies

Group companies with foreign shareholders are also subject to these provisions. The TCC allows for the extension of these provisions to group companies of such structure, and the right to file liability cases in Turkey, provided that the registered address of either the controlling company or the controlled company is in Turkey. Therefore, this provision paves the road for local shareholders or creditors to file cases in Turkey against the foreign controlling company (TCC Art. 202/1-e).

In conclusion, this new type of lawsuit introduced by the TCC aims to prevent the abuse of the controlling company's control against the controlled company, and repositions the controlling company to be accountable to the controlled company's shareholders and creditors. The breach of the rules results in important consequences and may lead to compensation liability of both the controlling company and members of its board of directors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.